Voices grow to tweak controls

The Vietnam Banking Association (VNBA), acting as a bridge between local lenders and the State Bank, last week compiled comments from 14 local credit institutions submitted to the State Bank detailing potential pitfalls once Circular 13/2010/TT-NHNN comes into effect.

One of the biggest fears was the circular restricting a bank to use just a maximum 80 per cent of its mobilisation for lending.

More importantly, the circular provides that in total mobilisation, non-term deposits from corporate customers and organisations such as the State Treasury or Vietnam Bank for Social Policies are not included.

Vo Thi Sanh, vice head of Bank for Investment and Development of Vietnam’s Treasury Department, said that the regulation, taking effect from October 1, 2010 was too strict.

“It should be noted that non-term deposits from State Treasury, Bank for Social Policies or corporate depositors normally make up 15-20 per cent mobilisation of any bank,” said Sanh.

For instance, if a bank has $100 million in term-deposits and $15 million in non-term deposits from the State Treasury, it has only $80 million available for lending.

VNBA general secretary Duong Thu Huong admitted that non-term deposits from organisations such as the State Treasury or Bank for Social Policies were a stable source of deposits and local lenders should be allowed to use it for lending.

“VNBA’s members fully support Circular 13/2010/TT-NHNN. But, it just needs some technical adjustments like we have mentioned to be perfect,” said Huong.

Additionally, in Circular 13, funds borrowed from foreign credit institutions are also subjected to the 80 per cent limit. For instance, a local bank borrowed $100 million from a foreign bank and it is allowed to use up to $80 million for lending.

“It is inappropriate. Banks should be allowed to use the whole amount for lending,” said VNBA.

Huong said the loans from overseas banks were normally extended to specific project or customer in which domestic banks just act as an intermediary.

“Or sometime, the government guaranteed  loans from overseas banks to local enterprises. In this case, the local lender is just like a local partner, a fund dispenser and fund using supervisor,” said the VNBA.

Circular 13 dated May 20, 2010 was designed to better control banking system by applying stricter safety criteria. It also raised minimum capital adequacy ratio  from 8 to 9 per cent from October 1, 2010.